MSPs Leading VARs in the Cloud?
Conventional wisdom says MSPs — already hooked on recurring revenue models — will move faster than traditional VARs into cloud computing. But is conventional wisdom correct? I found the answer by piecing together some anecdotal information from Rackspace and Ingram Micro. Here are the quick details.
As you may recall, Rackspace and Ingram Micro announced a cloud partnership in July 2010. Fast forward to the present, and Rackspace tells me they’re enjoying considerable momentum with Ingram Micro Seismic partners. It sounds like scores of Seismic partners — most of which are MSPs — are promoting Rackspace’s cloud services to end customers. But sources say Rackspace is seeing slower cloud adoption among Ingram’s broader partner base, which includes a mix of resellers, VARs, integrators and service providers.
The anecdotes above aren’t surprising. But they do show history repeating itself. I suspect only about 10 percent of solutions providers have made the transition from reseller to true MSP. And the reseller-to-MSP wave have been building for about a decade or so.
Many VARs missed the initial managed services waves — managed storage, managed security, remote monitoring, and so on. Now, Ingram Micro Director of Services Jason Beal is calling on resellers, VARs and MSPs to catch the next wave — cloud services specialization.
Based on Rackspace’s experience recruiting partners, I suspect MSPs will be first movers into that cloud specialization opportunity. Plenty of VARs and resellers — the masses — will eventually follow suit.
In April 2010, NetSuite said 2010 was the year of the cloud in the channel. For MSPs, I think that’s true. For traditional VARs, I think we’re still about a year away. No doubt, The VAR Guy (our sister site) is looking forward to 2011…
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The MSP model and the Cloud Computing model of delivery are very similar from a business and support perspective. You illustrate this, and we’re seeing it ourselves in our customers. It’s a very natural discussion for us, both on the sales side and the service side ,and it’s because our team is very used to thinking in that recurring model.
Hey Dave, I suspect I stated the obvious to you and many other readers. But I appreciate you reinforcing the point the way you did. Hope all is well.
-jp
Dave and Joe – spot on. In both managed services and cloud services, the technology changes are important, but not necessarily difficult for a solution provider to learn. The business model changes, however, are both critical and challenging.
It’s not that a traditional VAR will not be motivated to move to the cloud, nor that they are less able technically to succeed in that technology delivery model. Only that the shift to recurring revenue (plus the dynamics of selling long-term contract engagements, adding services around the technology subscription, maintaining long-term contract customer relationships, etc.) will take longer from where a traditional VAR begins. An MSP who has already made many of those changes has a natural (though not permanent) advantage. The traditional VAR will inevitably catch up, thus “first mover advantage” applies in this case more than many others.
Without a doubt the most valuable lesson from the MSP transition is that the business dynamics of a new model can override the technical benefits of the new service model – even when the benefits are obvious to the customer and the solution provider. And not all solution providers are cut out to make that transition effectively.
Such is the nature of competitive evolution: new models emerge … some companies adapt … others fall behind. And it’s about to happen again in earnest. Should be an exciting could of years.
Hey Joe,
I guess first to comment is always the prescient one. Seriously though, your thoughts hit home. And Dave and Ryan have it right–mostly. I would suggest natural evolution, and since I have been around for a couple of years, this is just another step in that process. Nothing special, just change.
Morph or die. That is the mantra of the reseller, come solution provider, come MSP. And I like it. “Cloud” is coming…I suggest you embrace it.
Gerard
Ryan: Please keep us posted as you post trends within your own clientele.
Gerard: I was down at the Rackspace conference earlier this week. Roughly 100 VARs, MSPs and integrators attended. Sitting in the audience it was clear: Cloud is here. You just have to hang out with the right crowd to see it. I’ve always been a cloud believer, since we built our own business completely in the cloud (a natural step for a blog media company).
The cloud hype is overwhelming at times. And I’m tired of hearing about “cloud products” that are simply old products with a cloud label slapped on them.
Still, if you focus you’ll see all the real cloud players right in front of your eyes…
-jp
I agree with all of the above. The key question is “How?”.
Clearly reselling various public SaaS/Cloud offerings is a good thing to do but how does my managed services business relate to this?
As an RMM vendor we have been thinking about how we can help MSPs migrate from traditional on premise infrastructure to the a hybrid IT world including the cloud for a few years now.
We have concluded that the answer is obvious – just treat the cloud as you would local infrastructure. So Managed Workplace now supports BPOS, Intermedia, Netsuite and others, monitoring their performance on s single dashboard allowing MSPs to monitor all IT with consolidated alerting, reporting and remdiation on everything required to ensure their customers are looked after and creating new values well beyond the resale margins offered by vendors.
Peter Sandiford
http://www.levelplatforms.com
No doubt moving into cloud is leading all marcom messages nowadays. On your article, Joe, you’re raising some very valid concerns about who will be the first and if all members of the value chain are ready for it. The role of us as vendors is to facilitate the movement of VARs and resellers, by setting up the right tools. Right tools means brand new solutions (products) but keeping all the accumulated knowhow (I can hardly see traditional products to be used efficiently to provide cloud services). As a matter of fact, there is no difference for the customer: he keeps having the same need. It is the new MSP the one that has things to implement and business processes to change.
From my point of view, the highest difficulty is found on the IT printing business (because of the need to keep the resources -printers- close to customer, and the need to keep delivering toner and other consumables). But this is already possible (i.e. using CloudPrinting Suite from http://www.nubeprint.com). The formula is “Technology + BPM = Cloud friendly solutions”. Us as vendors have to take our part of responsibility on the transition from commodity selling to solution selling if we really want to lead the future. Because I strongly believe that the Cloud is here to stay with us.
Peter@6: Thanks for your insights. I’m wondering how many MSPs are starting to remotely monitor BPOS, NetSuite, Intermedia, etc.? Curious to see if/how MSPs build managed practices around the single dashboard approach.
Antonio@7: Is it safe to assume you work for NubePrint?
-jp
That’s exactly the point: how many MSPs are just doing things as their clients used to before getting the task subcontracted? Is the major MSP argument still built around the cost? Of course I share that there are BPO areas where the value proposition of an MSP has much more evoluated. But still many not (printing being one of them). In fact, according to my specific experience (yes, I am in the vendor’s side providing solutions for the outsource of printing resources), certain tasks are a hassle that nobody wants to take care of. But at the same time these tasks are generating huge profits to many (i.e.: the toner of the printers is the only remaining “old” business that still handles 2 digists margins). So is it fair to think that there is little interest from certain industry members to move ahead with cloud solutions? On the opposite side customers are now very concerned about costs and they are demanding solutions.
Thanks Joe for this opportunity for open discussion.I follow your site because all articles are really interesting and this debate shows the MSP open mind.
I would like to know more about Antonios´s vision and (it looks like, NubePrint´s alternative).
Antonio,
Do you mean that current MPS solutions could be enforced adding to them the NubePrint solution?.
Which would be the real benefit for the MPS, MSP and customer?.
Thanks to both.
Pancho
Pancho:
MPS is a set of services (toner needs identification, toner delivery, technical service delivery, printing resources assignment…) coordinated in an efficient way. I do not know if this is the most complex business (certainly not) but I know that this service can’t be delivered without the right IT resources. At the end of the day the MPS provider has to prove to its customers that it is adding value on managing its printing resources. And one of the parameters to consider is saving costs to the customer (hidden costs are very high in this business). But in most of the cases this complex service is to be delivered in partnership with other companies (i.e. a distributor would supply the consumables, technical support is to be delivered by the Maintenance company). These partners have been in the market for years, and therefore they are very good on their specialty. So the challenge is to take the best from each one, and merge it into a single engine that drives to an end-to-end solution. Most of the existing tools in the market force you to work in a different way. My approach is that I want the tool to adapt to the way I do work, but automates and/or improves those things on which I have a lack of efficiency.
Benefits for all players are evident: you maintain what makes you different from your competitors (opposite to become “standard” to market); you leverage from partnering with other companies that have excellent processes; you can adapt to your customer needs (opposite to force your customer to accept a certain delivery just because you can’t do it); you maintain high levels of efficiency, meaning more profit for you and better price and quality delivered to your customer.
Antonio, Pancho: Thanks for keeping the dialog going, and for reading MSPmentor.
-jp